1. supply chain development for biomass fuel - challenges and opportunities

7/30/2019 1. Supply Chain Development for Biomass Fuel - Challenges and Opportunities

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C611/020/2003Supply ch ain developm ent for b iom assfuel - hal leng es and op po rtuni t iesP SIMPSONPDM Group Limited, Nuneaton, UK

INTRODUCTIONThe future development of biomass-fired power generation capacity presents significanttechnical challenges as well as economic opportunities for the bioenergy sector. How thesector addresses the challenges and delivers a satisfactory solution will be the key to thesectors future economic prosperity.Achieving a secure fuel stream that satisfies the business drivers of economy, efficiency andeffectiveness whilst remaining within acceptable parameters for environmental impact,quality and future sustainability will be essential to future project development.Developers need to balance the public and political demand for the development of innovativeenergy resources such as willow and energy crops with the pragmatic economic and fuelsecurity demands of financial stakeholders.

BACKGROUNDProjects completed under the early rounds of NFFO pioneered the use of agricultural residues(from both vegetable and animal production) for renewable power generation. Despite facingsignificant technological and operational challenges the projects proved the fundamentalstrengths of the concepts and gave developers the opportunities to establish operationalcompetence in the em erging marketplace.It is encouraging to note that today, almost 10 years since the worlds first animal-residuefired power plant opened at Eye in Suffolk the UK is still the only country in the world withpower plants producing electricity from animal residues such as poultry litter. This is asignificant achievement both in terms of renewable power generation and the removal ofanimal residues and nitrates from sensitive agricultural areas.

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The success of the renewable energy plant at Widnes operated by the PDM Group also showsthe application of innovative concepts to provide renewable energy (both electricity to thegrid and steam to local users). The plant at Widnes along with a sister site at Wymington,Bedfordshire has been so successful that the company met its initial 40 month productiontarget after a period of only 23 months. The plants performance against tough operational andenvironmental targets provides a perfect example of what can be achieved through selectingthe right technology, and developing the interface between the supply chain and operation ofthe plant in an efficient and effective manner.The utilisation of similar plant concepts expanded to incorporate other locally producedbiomass materials forms part of PDMs future strategy for renewable energy generation.Alongside this continuing development of proven technology and operational concepts thecompany will be developing other innovative areas of power generation using renewable fuelssourced from agricultural and industrial biomass residues.The UKs track record in the use of closed loop biomass energy crops such as willow andmyscanthus is not so good. Many valuable lessons can be learned from the unfortunate failureof the ARBRE project and the lack of success with other projects associated with closed loopbiomass. Empirical evidence suggests that for biomass to be successful as a fuel source forrenewable energy the material has to be a residue from some other primary productionprocess.

SUPPLY CHAIN CHALLENGESFuture renewable energy projects will have to meet much more stringent regulations andguidelines on all areas of operations, from environmental emissions, feed stock materials,process residue disposal or recycling through to employment conditions.The latest advice on the Waste Incineration Directive suggests that materials previouslyaccepted as clean biomass are now going to be categorised as waste. Therefore any projectslooking to use this type of readily available biomass will have to comply with the sameemission limits as waste incinerators. The Industry must come to terms with the newlegislation and m ove away from the view that it has an exclusive right to be excluded.Project Operators looking to utilise innovative residue-sourced materials are restricted byincreasing demands for audit trails, material analysis and testing protocols laid down by theEnvironment Agency. Whilst protecting the environment is central to all our objectives inmany ways the renewables sector is being excessively constrained.There is much comment in the media about the need for joined-up government policies; thecontradictory positions on issues within the renewables sector being taken by DEFRA and theEA are prime examples of the failure to operate a common strategy. For instance, how is i tacceptable for certain waste products to be spread on the land and used in arable agriculturebut they are severely restricted or even banned from use as renewable fuel for powergeneration?For example, if a renewable energy plant wishes to use wood from a timber mill i t is virtuallyimpossible to obtain a workable approval, if an animal bedding company wishes to take thesame material for use as bedding there are very few if any constraints placed upon them. I t is

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ironic that the very same wood products that in their virgin state are deemed a waste and notsuitable for use in the renewable energy plants become perfectly acceptable once they comeinto contact with, for instance, chicken production and are then supplied to renewable energyplants as poultry litter.

FUTURE OPPORTUNITIESIt is my view that issues such as the Waste Incineration Directive, Landfill Directive andIPPC as well as the Renewables Obligation should be viewed positively as opportunitiesrather than m erely threats to the sector and in particular to operators of older generation plant.We must not lose sight of the global benefits being sought by tighter regulation andlegislation.Whereas in the past developers have been able to secure long term supplies of agriculturalresidues and other forms of open loop biomass fuels and transport them often hundreds ofmiles to the project sites, in the future the focus will have to be on locally sourced materialsfuelling smaller scale sustainable low impact projects. The projects will have to overcomethe technical constraints resulting from the implementation of the Waste IncinerationDirective whilst still being able to operate and provide an acceptable economic return for thefinancial stakeholders.The fuel streams for such projects will form a basket of open loop biomass encompassingmaterials such as animal production residues, recycled materials, food production residues,biosolids as well as new energy crops. Furthermore the energy production both in terms ofelectricity and steam must form part of the portfolio of energy available to the local area.Such small scale projects will need to be developed in partnership (either formal jointventures or on an informal cooperative basis) with local stakeholders such as Councils, WaterCompanies and the wider local community. Engaging the local stakeholders will assist withacceptance of the projects as local solutions to local problems. Past objections to renewableprojects have centred on the impact on the local environment as well as the NIMBY issuessuch as importing other peoples problems for recycling/disposal.Looking at the materials available for fuel streams, the UK land spreads around 98 millionwet tonnes per annum of industrial residues. Of this, 93% comes from animal production andaround 5% is from other industrial sources such as resides from fruit and other vegetableprocessing (it is estimated that fruit and vegetable production alone yields around 3 milliontonnes). Even allowing for localised fertiliser usage on arable land there remains a significantpotential renewable fuel source available nationwide from the anim al production sector.The landspreading of residues is going through a period of change, whilst the use oflandspreading is certain to continue increasing legislation and env ironmental control is certainto create further opportunities for the use of materials from this sector as renewable biofuels.The UK is obliged under EU directives to reduce the quantity of biodegradable material beingplaced into landfill. Because the UK is so dependent on landfill the government has set outthe following timetable:

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By 2010 to reduce biodegradable municipal waste landfilled to 75% of that produced in 1995By 2013 to reduce biodegradable municipal waste landfilled to 50% of that produced in 1995By 2020 to reduce biodegradable municipal waste landfilled to 35% of that produced in 1995.To put the targets in context, assuming 60% of municipal waste is biodegradable, the UKneeds to divert at least: 3.2 million tonnes of biodegradable municipal waste each year to m eetthe first target; 7.5 million tonnes of biodegradable municipal waste each year to meet thesecond target; and 10.1 million tonnes of biodegradable municipal waste each year to meetthe third target. The targets create significant opportunities for material recovery forrenewable power generation.The UK also disposes of almost 50% of sewage sludge by land recycling such as injection.As well as residues from agriculture and recycled elements of domestic waste streams, theUK produces a huge quantity of residues from industrial food production. Such residuesoften go to land filling or have, in the past, been used for the production of animal feedrations. The restriction on the use of landfill as a disposal option is going to create a potentialmajor new area of fuel materials for the renewables sector.Building on their past success in the renewable energy sector the PDM Group have recentlyannounced plans for an Integrated Renewable Energy and Recycling facility adjacent to theirexisting processing plant at Hartshill near Nuneaton in Warwickshire. The supply chainstrategy for the plant provides a good example of the type of localised renewable energy andrecycling plants that are likely to become common place in the future renewable bioenergymarketplace in the UK.As well as utilising the meat and bone meal produced from the neighbouring rendering plant,the project will recycle 60,000 tonnes of locally produced waste materials (the biomasselement will be used for power generation and the other elements recycled) and existing pipework to the adjacent water treatment works will be utilised for the pumping of biosolids forintegration into the fuel feed.As well as delivering the usual benefits of renewable energy production, C02 reduction andlocal employment the project will deliver a significant reduction in local HGV traffic andodours.Looking at the market from a holistic viewpoint it can be seen that the projects that haveachieved success up to now have either followed a mixed-bag approach to securing anddeveloping fuel streams or have focussed on a material where the developer has existingexperience and competence.Looking at the early NFFO projects in particular, materials with known benefits and handlingcharacteristics such as wood chips and straw have been used to balance the development ofinnovative materials such as poultry litter, coffee residues, mustard husks and spice wastes. Itis this wide ranging fuel procurement approach that I believe offers the best route for futuredevelopers. Future developments should use this type of model and the combination of knownproducts and new developments for developing their own supply chain strategy.

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Although a pragmatic approach utilising a variety of fuel types from different materialstreams including industrial residues may not fully satisfy the des ire for process an d supplyinnovation it will enable developers in the sector to contribute to the UKs ability to deliveron environmental improvement targets.In addition to the technical and operational challenges such a market-driven mixed bagstrategy will undoubtedly present, the developers will also need to establish the businesssystems in such a way that they provide a greater customer focus than has existed up to now.If the sector is to create a viable alternative to systems such as landfill then the way thesupplier/consumer relationship is handled will have to be managed accordingly. For instance,moving towards a service-based operation will require developers to look closely at theirtechnical systems and in particular their materials handling and storage. Put simply theprocess employed must be able to handle the by-products generated by the supply chain itserves and provide an acceptable level of service guarantee.Although moving operations towards the utilisation of residues from food production andother industrial sources as well as energy crops or agricultural products provides potentialbenefits to the Project Operator it will also mean changes to the methods employed fo r supplychain management.Project Operators will have to manage their supplier relationships on an Account managementbasis utilising skills and systems such as those that are now extensively employed elsewherein the service sector. Up to now Projects have operated in an almost closed market for fuelmaterials, with the demands for renewable energy compliant feed stocks such as poultry litteror straw etc. certain to increase over the coming years the O perators w ill have to de velo p theirresources and capabilities in such a manner that they are able to service their markets andcreate sustainable long term relationships with their supply cha in partners.A fundamental change in attitude on the part of Developers towards their supply chainpartners is required to reflect the change in strategic direction and new marketplace. Thesupply chain partners will need to feel comfortable that the Project Developer will create asecure, reliable disposal route for their by-products. A route that not only gives anenvironmentally sustainable option but will not suffer frequent delivery suspensions due toplant breakdown or an inadequate stock holding capacity at the plants. Passing the pain ofpoor design to supply partners does little to encourage long term cooperation.

SUMMARYIf the Renewable Bioenergy sector is to develop and maintain a competitive advantage withinthe wider environmental market against alternative disposal routes attention must be paid tofocussing on the supply chain and maintaining partner loyalty and level of service.Developers looking to leverage their resources employed in managing supply chains may lookto expanding the range of services offered to encompass materials management foralternatives such as composting or biogas production. The ability to deliver an integratedapproach to the recycling or recovery of materials for a variety of uses (be it powergeneration, compost, biogas or biodiesel) will enable the sector to structure its operations in a

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sustainable, economically beneficial manner. Developers could extend their areas of operationto provide a unified disposal route for all grades of organic residues.Future developments will undoubtedly be unable to attract the same level of financial supportfor infrastructure and operating costs from the taxpayer as has existed in the past. In order tooperate successfully in an environment where public subsidy will be reduced or removedOperators will have to focus on their supply chain costs (providing a financial alternative tolandfill for instance), plant developmenr/operating costs and the quality of service provided tothe customer.By carefully utilising the opportunities created by developments such as the WasteIncineration Directive, Landfill Directive and IPPC legislation, Project Developers will beable to create robust, sustainable business models and generate healthy economic returns forinvestors in the renewables sector. Creating projects that enable supply chain partners tocomply with their own environmental obligations and targets whilst also delivering a fuelstream compliant with the Renewables Obligation fuel-type criteria will be central to thesectors future success.

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1. supply chain development for biomass fuel - challenges and opportunities

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